Deutsche Bank Securities

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1 Telkom SA Limited incorporated in the Republic of South Africa Registration number 1991/005476/06 139,257,954 Ordinary Shares offered in the form of Ordinary Shares or American Depositary Shares, or ADSs, each representing 4 Ordinary Shares This is an initial public offering of 139,257,954 ordinary shares, having a par value of R10 each in the capital of Telkom SA Limited, by the Government of the Republic of South Africa. This offering is a global offering being made in the United States and the Republic of South Africa and to institutional investors outside of those jurisdictions. 19,450,200 ordinary shares are being offered and sold to investors in the United States pursuant to the Registration Statement filed under the US Securities Act of Initial offers and sales outside the United States are not being registered under the US Securities Act of 1933 and are being made under Regulation S under the US Securities Act of All of the ordinary shares to be sold in the global offering are being offered by the Government of the Republic of South Africa. We will not receive any of the proceeds from the sale of the ordinary shares in the global offering. Prior to this global offering, there has been no public market for the ordinary shares or ADSs. The JSE Securities Exchange, South Africa has agreed to list all the ordinary shares in the Telecommunications Services sector of the list of the JSE Securities Exchange, South Africa under the symbol TKG and ISIN Code ZAE , subject to the attainment of a spread of shareholders acceptable to the JSE Securities Exchange, South Africa and the submission of all supporting documents required by the JSE Securities Exchange, South Africa. The ADSs have been approved for listing on the New York Stock Exchange under the symbol TKG, subject to official notice of issuance. Please see page 174 of this prospectus for a description of the views of the JSE Securities Exchange, South Africa on the creation of the class A ordinary share and class B ordinary share in the share capital of Telkom on the JSE Securities Exchange, South Africa listing date and the rights afforded to the holders thereof. Investing in Telkom s ordinary shares and ADSs involves risks. See Risk Factors beginning on page 17 of this prospectus. Proceeds to the Underwriting Government of the Discounts and Republic of South Africa Price to Public Commissions (1) (before expenses) Per ordinary share in the US and International offerings R28.00 R0.53 R Per ordinary share in the general South African retail offering R26.60 R0.51 R Per ordinary share in the Khulisa offering... R22.40 R0.43 R Per ADS in the US and International offerings.. $13.98 $0.27 $ Total (2) (million) $ (1) Underwriting discounts and commissions do not include fees of up to R17,376,927 that may be payable at the discretion of the Government of the Republic of South Africa. (2) Assumes all shares offered in the global offering are sold in the form of ordinary shares and assumes an exchange rate of R8.01 per $1.00. The Government of the Republic of South Africa has granted the joint global coordinators, on behalf of the underwriters, a 30-day option to purchase up to a maximum of 20,888,693 additional ordinary shares on the same terms and conditions set forth above solely to cover over-allotments, if any. Neither the US Securities and Exchange Commission, the South African Registrar of Companies, the JSE nor any other regulatory body has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus as truthful or complete. Any representation to the contrary is a criminal offense. This prospectus does not constitute an offer for sale of ordinary shares or ADSs in the Republic of South Africa and may not be distributed in South Africa. It is expected that the ordinary shares and ADSs will be delivered on or about March 7, Deutsche Bank Securities JPMorgan Schroder Salomon Smith Barney UBS Warburg HSBC Investec Barnard Jacobs Mellet Prospectus dated March 4, 2003

2 INDEPENDENT AUDITORS For Telkom SA Limited Ernst & Young 52 Corlett Drive Illovo, 2196 P O Box 2322 Johannesburg, 2000 For Vodacom Group (Proprietary) Limited PricewaterhouseCoopers, Inc. 232 Ida Street Menlo Park, 0107 P O Box Menlo Park, 0102 Deloitte & Touche 221 Waterkloof Road Waterkloof Pretoria, 0181 P O Box Hatfield, 0028 REGISTERED AND HEAD OFFICE OF TELKOM SA LIMITED Telkom Towers North 152 Proes Street Pretoria, 0002 Private Bag X881 Pretoria, 0001 COMPANY SECRETARY Vincent Vikimpi Mashale (B Comm (Hons)) Telkom Towers North 152 Proes Street Pretoria, 0002 Private Bag X881 Pretoria, 0001 TRANSFER SECRETARY Computershare Investor Services Limited Registration number 1958/003546/06 70 Marshall Street Johannesburg, 2001 P O Box 61051, Marshalltown, 2107 Deutsche Bank AG London Winchester House 1 Great Winchester Street London, EC2N 2DB JOINT GLOBAL CO-ORDINATORS J.P. Morgan Securities Ltd. 60 Victoria Embankment London, EC4Y OJP JOINT GLOBAL CO-ORDINATORS CONSORTIUM MEMBERS Standard Corporate and Merchant Bank (A division of The Standard Bank of South Africa Limited) Registration number 1962/000738/06 3 Simmonds Street Johannesburg, 2001 P O Box Marshalltown, 2017 African Harvest Capital (Proprietary) Limited Registration number 1998/001469/07 3rd Floor Sanclare Building 21 Dreyer Street Claremont, 7700, Cape Town Private Bag X9936 Sandton, 2146 Wipcapital (Proprietary) Limited Registration number 1997/021195/07 61 Central Street Houghton, 2198 Postnet Suite 104 Private Bag X2600 Houghton, 2041 COMMERCIAL BANKERS ABSA Bank Limited Registration number 1986/004794/06 ABSA Tower East 170 Main Street Johannesburg, 2001 P O Box 7735 Johannesburg, 2000 PRINTED BY INCE (PTY) LTD

3 Through and including the 25th day after the date of this prospectus, all dealers effecting transactions in these securities, whether or not participating in this global offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. 139,257,954 ordinary shares in the form of ordinary shares or American Depositary Shares TELKOM SA LIMITED PROSPECTUS Deutsche Bank Securities JPMorgan Schroder Salomon Smith Barney UBS Warburg HSBC Investec Barnard Jacobs Mellet Prospectus dated March 4, 2003

4 You should rely only on the information contained in this prospectus. We and the Government of the Republic of South Africa have not authorized anyone to provide you with different information. We and the Government of the Republic of South Africa are not offering to sell or soliciting offers to buy the ordinary shares or ADSs in places where such offers and sales are not permitted by applicable law. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this prospectus. TABLE OF CONTENTS Page Prospectus Summary Risk Factors Special Note Regarding Forward-Looking Statements Use of Proceeds Dividends and Dividend Policy Exchange Rates Capitalization Selected Historical Consolidated Financial and Other Data of the Telkom Group Management s Discussion and Analysis of Financial Condition and Results of Operations The South African Telecommunications Industry Business Legal Proceedings Regulation and License Requirements Management Relationship with Major Shareholders and Related Transactions Relationship with Vodacom and Related Transactions Description of Shares Description of American Depositary Receipts Nature of the South African Trading Market Taxation Exchange Controls The Global Offering Underwriting Legal Matters Experts Expenses Relating to the Global Offering Enforcement of Civil Liabilities Where You Can Find More Information Documents Available for Inspection Additional Information Index to Financial Statements F 1 Republic of South Africa A 1 Extracts from Telkom s New Memorandum and Articles of Association B 1

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6 PROSPECTUS SUMMARY Overview Telkom is one of the largest companies registered in the Republic of South Africa and we are the largest communications services provider on the African continent based on operating revenue and assets. We had consolidated operating revenue of R34.2 billion ($3.2 billion), net profit of R1.2 billion ($116 million) and cash flow from operating activities of R8.2 billion ($775 million) in the year ended March 31, 2002 and we had total assets of R55.2 billion ($5.2 billion) and shareholders equity of R16.8 billion ($1.6 billion) as of March 31, We had consolidated operating revenue of R18.3 billion ($1.7 billion), net profit of R0.6 billion ($61 million) and cash flow from operating activities of R3.5 billion ($328 million) in the six months ended September 30, 2002 and we had total assets of R54.6 billion ($5.2 billion) and shareholders equity of R17.5 billion ($1.7 billion) as of September 30, We offer business, residential and payphone customers a wide range of services and products, including: fixed-line voice services, including subscriptions and connections services, local, long distance, fixed-to-mobile and international voice services, interconnection and transit communications services, value-added voice services, customer premises equipment sales and directory services; fixed-line data services, including domestic and international data transmission services, such as leased lines and packet-based services, managed data networking services and internet access and related information technology services; and mobile communications services, including voice and data services, value-added services and handset sales through our joint venture, Vodacom, a company incorporated in the Republic of South Africa. We had the exclusive right to provide public switched telecommunications services, including international voice services, in South Africa until May 7, We are currently the only national provider of these services in South Africa, although a process has been commenced to liberalize the South African communications market, which will introduce competition in a number of our business areas. In 1997, we embarked on an extensive five year capital investment program in our fixed-line business. Our fixed-line capital investment for the five years ended March 31, 2002 was R41.7 billion ($4.0 billion), of which R27.9 billion ($2.6 billion) was for network modernization and line roll-out in order to comply with our license obligations and prepare for competition. As of September 30, 2002, we had 4.9 million telephone access lines in service and 99.8% of our telephone access lines were connected to digital exchanges. Vodacom is our mobile communications joint venture with Vodafone Group Plc, a company incorporated in England and Wales, and VenFin Limited, a company incorporated in the Republic of South Africa. Vodacom is the largest mobile communications network operator in South Africa with a market share of approximately 59% as of September 30, 2002 based on total reported customers. Vodacom had 7.7 million customers as of September 30, 2002, of which 7.1 million were in South Africa. Vodacom has investments in mobile communications network operators in Lesotho, Tanzania and the Democratic Republic of the Congo. Vodacom had consolidated revenue of R16.2 billion ($1.5 billion), net profit of R2.4 billion ($225 million) and cash flow from operating activities of R3.8 billion ($362 million) in the year ended March 31, 2002 and total assets of R15.4 billion ($1.5 billion) and shareholders equity of R5.5 billion ($518 million) as of March 31, Vodacom had consolidated revenue of R9.4 billion ($895 million), net profit of R0.9 billion ($87 million) and cash flow from operating activities of R1.6 billion ($155 million) in the six months ended September 30, 2002 and total assets of R17.3 billion ($1.6 billion) and shareholders equity of R6.3 billion ($601 million) as of September 30, We believe that we have a number of competitive strengths that will enable us to increase our profitability and cash flow and successfully meet competition. Our competitive strengths include our leading market position in the South African fixedline communications market, our state-of-the-art, fully digital fixed-line network and the financial, operational and managerial expertise of our strategic equity investor, Thintana Communications LLC, a Delaware limited liability company, which is 60% beneficially owned by SBC Communications, Inc., a Delaware corporation, and 40% beneficially owned by Telekom Malaysia S.D.N. Berhard, a company incorporated in Malaysia. In addition, Vodacom is the leading South African mobile communications network operator with strong brand recognition, extensive network coverage and distribution channels, experienced local and international shareholders and management and Vodacom is expanding its operations in other select sub-saharan Africa countries. Our group strategy Our group strategic goals are to increase shareholder value by increasing profitability and cash flows, while maintaining our market leadership in the South African fixed-line and mobile communications markets. We also intend to support Vodacom s strategy of establishing and maintaining leading positions in other sub-saharan African mobile markets. In addition, we will seek to increase the synergies between our fixed-line business and Vodacom. 1

7 In order to achieve our goals, we intend to pursue the following strategies: compete effectively in our core fixed-line markets and grow selected markets; continue to reduce operating expenses and enhance capital investment efficiencies in our fixed-line business; expand our integrated service offerings through the increased sale of existing data products and the development of new data and fixed-mobile products; continue to invest in our fixed-line employees to foster a highly competitive corporate culture and to enhance skills retention; and capitalize on the growing mobile communications market through Vodacom. Group operational structure Our business segments and group operational structure are as follows: Fixed-line Mobile Telkom SA Limited 50.0% Vodacom Group (Proprietary) Limited 64.9% Telkom Directory Services (Proprietary) Limited 100.0% Swiftnet (Proprietary) Limited History Telkom was incorporated on September 30, 1991 as a public limited liability company registered under the South African Companies Act, 61 of 1973, as amended. On that same date, the Government of the Republic of South Africa transferred the entire telecommunications enterprise of the then Department of Posts and Telecommunications of the Republic of South Africa to Telkom. Telkom remained a wholly state-owned enterprise until May 14, 1997, when the Government sold a 30% equity interest in Telkom to Thintana Communications as part of its policy to liberalize the telecommunications market in South Africa. On March 30, 2001, the Government sold another 3% equity interest in Telkom from its holdings to Ucingo Investments (Proprietary) Limited, a company incorporated in the Republic of South Africa comprising a consortium of black empowerment investors, leaving the Government with 67% of Telkom s issued and outstanding ordinary share capital. As part of the sale to Thintana Communications, the then Minister of Posts, Telecommunications and Broadcasting of the Republic of South Africa entered into an agreement with Thintana Communications under which Thintana Communications undertook significant operational and managerial responsibilities and acquired the ability to exercise effective operational and managerial control over us until May Since May 2002, our strategic equity investors no longer exercise effective operational and managerial control over us, but they continue to provide us with strategic direction as their nominees continue to occupy key managerial positions and participate in Telkom s operating committee. Upon completion of the global offering, the Government of the Republic of South Africa will own approximately 42% of Telkom s issued and outstanding ordinary share capital, or approximately 38% if the underwriters exercise their overallotment option in full, and Thintana Communications will own approximately 30% of Telkom s issued and outstanding ordinary share capital. Telkom s registration number is 1991/005476/06. Telkom s principal executive offices are located at Telkom Towers North, 152 Proes Street, Pretoria 0002, Gauteng Province, South Africa. Telkom s telephone number is (27) (12) and its internet address is Information contained on Telkom s website is not a part of this prospectus. Unless the context requires otherwise, references to we, us, our and the Telkom Group in this prospectus refer to Telkom SA Limited and its subsidiaries and its 50% interest in Vodacom, and references to Telkom in this prospectus refer only to Telkom SA Limited. References to Vodacom in this prospectus refer to Telkom s 50% owned joint venture, Vodacom Group (Proprietary) Limited, and its subsidiaries. We do not control Vodacom, the management of which requires consensus agreement among its shareholders who are party to Vodacom s joint venture agreement. 2

8 The Global Offering THE GLOBAL OFFERING A global offering of 139,257,954 ordinary shares by the Government of the Republic of South Africa in the US and International offerings and the South African retail offering. 19,450,200 ordinary shares are being offered and sold to investors in the United States pursuant to the Registration Statement filed under the US Securities Act of Offers and sales of ordinary shares and ADSs outside the United States, including all ordinary shares and ADSs offered to South African retail and institutional investors, are being offered pursuant to Regulation S under the US Securities Act of 1933 and are not covered by the registration statement filed with the US Securities and Exchange Commission. US and International Offerings 127,244,962 ordinary shares offered to retail and institutional investors in the United States and to institutional investors outside of the United States, including institutional investors in the Republic of South Africa, in the form of ordinary shares or ADSs. South African Retail Offering 4,967,914 ordinary shares offered to individuals in possession of a valid South African identity number and who provide a South African postal address and groups of such individuals, known as stokvels, at a 20% discount to the initial public offering price, rounded down to the nearest SA Cent, for up to R5,000 of ordinary shares per individual and up to R5,000 of ordinary shares per member of a stokvel, subject to a maximum of R50,000 of ordinary shares per stokvel, in the form of ordinary shares. This offering is referred to as the Khulisa offer. Ordinary shares purchased in this offering may not be sold for three months following the date of the listing of the shares on the JSE. The Government of the Republic of South Africa will also award investors under this offer one ordinary share for every five ordinary shares purchased and held in trust until the second anniversary of the JSE listing date. 7,045,078 ordinary shares offered to individuals in possession of a valid South African identity number and who provide a South African postal address at a 5% discount to the initial public offering price, rounded down to the nearest SA Cent, in the form of ordinary shares. See The Global Offering beginning on page 195 of this prospectus. Offering Price Over-Allotment Option Ownership of Controlling Global Offering R28.00 per ordinary share. This is equivalent to $13.98 per ADS at a ratio of 4 ordinary shares per ADS and an exchange rate of R8.01 per $1.00. Ordinary shares sold in the South African retail offering will be at the discounts set out above. The initial public offering price will be inclusive of uncertificated securities tax. The Government of the Republic of South Africa has granted the joint global co-ordinators, on behalf of the underwriters, a 30-day option to purchase up to a maximum of 20,888,693 additional ordinary shares on the same terms and conditions set forth above solely to cover over-allotments, if any. Following the completion of this global offering, Telkom s controlling shareholders will own the following shares: The Government will own the one issued and outstanding class A ordinary share and approximately 42% of Telkom s issued and outstanding ordinary share capital, or approximately 38% if the underwriters exercise their over-allotment option in full. Thintana Communications will own the one issued and outstanding class B ordinary share and approximately 30% of Telkom s issued and outstanding ordinary share capital. See Description of Shares beginning on page 166 of this prospectus for a description of the rights attaching to the class A ordinary share and the class B ordinary share. In connection with the global offering, the Government of the Republic of South Africa intends to grant to eligible current and former employees of Telkom options to purchase up to 11,140,636 of its ordinary shares, representing 2% of Telkom s issued and outstanding ordinary share capital, through the Diabo Share Trust established for that purpose at R33.81 per share, which is the price at which Thintana Communications invested in Telkom in See Management Other employee share ownership arrangements beginning on page 152 of this prospectus. 3

9 Voting Rights American Depositary Shares Use of Proceeds Listings Lock-Up Agreements Expected Timetable Payment and Settlement Information in this prospectus related to the size of the global offering and the ownership of ordinary shares by the Government of the Republic of South Africa does not include any sale of ordinary shares through the Diabo Share Trust for the benefit of former and current employees described above. The ordinary shares will generally vote together as a single class with the class A ordinary share held by the Government of the Republic of South Africa and the class B ordinary share held by Thintana Communications, except as required by law and as provided for by Telkom s new memorandum and articles of association. However, certain actions cannot be taken by Telkom or by its subsidiaries without the authorization of representatives appointed by the Government of the Republic of South Africa and Thintana Communications, as significant shareholders, respectively. See Management Reserved matters beginning on page 147 of this prospectus and Relationship with Major Shareholders and Related Transactions Shareholder arrangements New shareholders agreement beginning on page 157 of this prospectus. Investors outside of South Africa may purchase ordinary shares in the form of ADSs. Each ADS represents 4 ordinary shares and is evidenced by an American Depositary Receipt, or ADR. The ADS depositary is The Bank of New York. We will not receive any proceeds from the sale of ordinary shares or ADSs in the global offering. The JSE has agreed to list the ordinary shares in the Telecommunications Services sector of the JSE list under the symbol TKG, subject to the attainment of a spread of shareholders acceptable to the JSE and the submission of all supporting documents required by the JSE. The ADSs have been approved for listing on the New York Stock Exchange under the symbol TKG, subject to official notice of issuance. Telkom, Thintana Communications and the Government of the Republic of South Africa have agreed with the underwriters that none of them will sell additional Telkom ordinary shares for 180 days following the date of the underwriting agreement, subject to certain exceptions. In addition, the Government has agreed with Thintana Communications that the Government will not sell its Telkom ordinary shares for a further 545-day period after the expiration of the lock-up period described above. Ucingo Investments has agreed to enter into an agreement with the Government and the underwriters that it will not sell or dispose of ordinary shares in Telkom for 180 days following the date of the listing of Telkom s ordinary shares on the JSE without approval from the Government and the underwriters, such approval not to be unreasonably withheld. For a further description of the lock-ups and their exceptions, see Underwriting beginning on page 201 of this prospectus. We expect the timetable for the global offering to be as follows: January 30, 2003: South African retail offering opens and US and international offerings commence. March 4, 2003: Announcement of the initial public offering price and commencement of conditional trading of the ordinary shares on the JSE and trading of the ADSs on the New York Stock Exchange. March 7, 2003: Payment and delivery of ordinary shares and ADSs in the US and International Offerings. March 11, 2003: Dispatch of shareholder statements in the South African retail offering. Delivery of the ordinary shares and ADSs in the US and International Offerings is expected to take place against payment therefor in immediately available funds on or about March 7, As described in The Global Offering beginning on page 195 of 4

10 Risk Factors this prospectus, investors in the South African retail offering will have to make payment prior to this date. The ordinary shares will be delivered in dematerialized or electronic entry form through the facilities of Share Transactions Totally Electronic Limited, or STRATE. The ADSs will be delivered in book entry form through the facilities of The Depository Trust Company. The identification numbers for the ordinary shares and the ADSs are: Ordinary shares ISIN: ZAE ADSs CUSIP: ISIN and CUSIP are codes which uniquely identify a particular securities issue. For a discussion of certain factors that should be considered in evaluating an investment in Telkom s ordinary shares or ADSs, see Risk Factors beginning on page 17 of this prospectus. 5

11 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA OF THE TELKOM GROUP The following table sets forth summary consolidated financial and other data of the Telkom Group as of and for each of the three years in the period ended March 31, 2002 and as of and for each of the six month periods ended September 30, 2002 and Information in the following table includes our 50% interest in the results, assets, liabilities and shareholders equity of Vodacom, which we proportionately consolidate. The following summary historical consolidated financial data of the Telkom Group as of and for each of the three years ended March 31, 2002 was derived from the Telkom Group s historical consolidated financial statements beginning on page F 48 of this prospectus, which have been audited by Ernst & Young, Registered Accountants and Auditors, Chartered Accountants (SA). The following summary historical consolidated financial data of the Telkom Group as of September 30, 2002 and for each of the six month periods ended September 30, 2002 and 2001 was derived from the Telkom Group s unaudited condensed consolidated financial statements beginning on page F 2 of this prospectus, which, in the opinion of our management, have been prepared on the same basis as the Telkom Group s audited consolidated financial statements and reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Telkom Group s results of operations and financial position for such periods. Results for the six month periods ended September 30, 2002 and 2001 are not necessarily indicative of results that may be expected for the entire year. The consolidated financial statements of the Telkom Group have been prepared in accordance with International Accounting Standards, or IAS, which differs in certain respects from US Generally Accepted Accounting Principles, or US GAAP. For a description of the principal differences between IAS and US GAAP relevant to the consolidated financial statements of the Telkom Group and a reconciliation to US GAAP of net income and profit and shareholders equity, see note 41 of the notes to the audited consolidated financial statements of the Telkom Group as of and for the three years ended March 31, 2002 beginning on page F 97 of this prospectus and note 21 of the notes to the unaudited condensed consolidated financial statements of the Telkom Group as of September 30, 2002 and for each of the six month periods ended September 30, 2002 and 2001 beginning on page F 15 of this prospectus. Headline earnings per share is a disclosure requirement of the JSE and is not a recognized measure under US GAAP. Headline earnings represents net profit, excluding profit on the disposal of property, plant and equipment; profit on the disposal of subsidiaries and joint ventures; property, plant and equipment impairment losses; goodwill amortization; and tax and minority interest impacts. EBITDA represents operating profit before income tax, finance charges, investment income and depreciation and amortization. We believe that EBITDA provides meaningful additional information to investors since it is widely accepted by analysts and investors as a basis for comparing a company s underlying operating profitability with that of other companies as it is not influenced by past capital expenditures or business acquisitions, a company s capital structure or the relevant tax regime. This is particularly the case in a capital-intensive industry such as communications. It is also a widely accepted indicator of a company s ability to service its long-term debt and other fixed obligations and to fund its continued growth. EBITDA is not a US GAAP or IAS measure. You should not construe EBITDA as an alternative to operating profit or cash flows from operating activities determined in accordance with US GAAP or IAS or as a measure of liquidity. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. In addition, because the calculation of EBITDA in the maintenance covenants contained in our credit facilities is based on accounting policies in use at the time the indebtedness was incurred, EBITDA for purposes of those covenants is not calculated in the same manner as it is calculated in the following table. Fixed access lines are comprised of public switched telecommunications network lines, or PSTN lines, including integrated services digital network, or ISDN, channels, public and private payphones and internal lines in service. We calculate fixed-line penetration, or teledensity, based on the total number of telephone lines in service at the end of the period per 100 persons in the population of South Africa. Population is the estimated South African population at the mid year in the periods indicated as published by Statistics South Africa, a South African governmental department. We calculate fixed-line traffic, other than international outgoing mobile traffic and international interconnection traffic, by dividing traffic revenues for the particular category by the weighted average tariff for such category during the relevant period. Fixed-line international outgoing mobile traffic and international interconnection traffic are based on the actual traffic registered through the respective exchanges and reflected in international interconnection invoices. We calculate revenue per fixed access line by dividing total fixed-line revenue during the period, excluding data and directories and other revenue, by the average number of fixed lines during the period. We calculate our number of fixed lines per fixed-line employee on the basis of fixed lines in service at period end divided by the number of employees in our fixed-line segment at period end, excluding employees from our two subsidiaries, Telkom Directory Services and Swiftnet, which do not provide public switched telecommunications services. 6

12 Rand amounts as of and for the year ended March 31, 2002 and as of and for the six months ended September 30, 2002 have been translated into Dollars solely for your convenience at R10.54 per $1.00, the Rand noon buying rate discussed in Exchange Rates on page 31 of this prospectus on September 30, 2002, the date of the Telkom Group s most recent consolidated balance sheet included in this prospectus. These translations should not be construed as representations that the Rand amounts could actually be converted into US dollars at these rates or at all. You should read the following information together with Risk Factors beginning on page 17, Capitalization on page 32, Selected Historical Consolidated Financial and Other Data of the Telkom Group beginning on page 33, Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 39 and the consolidated financial statements and the notes thereto of the Telkom Group and Vodacom beginning on page F 2 of this prospectus. 7

13 THE TELKOM GROUP Summary Income Statement Data Six months ended Year ended March 31, September 30, ZAR ZAR ZAR USD ZAR ZAR USD Amounts in accordance with IAS (unaudited) (in millions, except per share amounts) Operating revenue ,113 31,352 34,197 3,244 16,523 18,316 1,738 Employee expenses ,713 6,590 7, ,590 3, Payments to other operators ,241 4,983 5, ,654 3, Selling, general and administrative ,324 6,971 8, ,794 3, Services rendered ,439 1,539 2, ,091 1, Operating leases ,292 1, Depreciation and amortization ,174 5,052 5, ,643 3, Operating expenses ,231 26,427 29,984 2,844 14,355 15,505 1,471 Operating profit ,882 4,925 4, ,168 2, Investment income Finance charges (2,482) (3,137) (2,550) (242) (1,845) (1,779) (169) Profit before tax ,041 2,405 2, , Taxation (501) (715) (873) (83) (206) (456) (43) Profit after tax ,540 1,690 1, Minority interests (13) (68) (59) (5) (52) (84) (8) Net profit ,527 1,622 1, Number of ordinary shares outstanding (millions) Basic Diluted Earnings per share (cents) Basic Diluted Dividends per share (cents) Amounts in accordance with US GAAP Net revenue n/a 26,413 27,947 2,653 13,657 14,605 1,386 Operating income n/a 3,716 2, ,711 2, Net income n/a 1,598 1, Earnings per share (cents) Basic n/a Diluted n/a

14 Summary Balance Sheet Data As of As of March 31, September 30, ZAR ZAR ZAR USD ZAR USD Amounts in accordance with IAS (unaudited) (in millions, except per share amounts) Total assets ,276 53,537 55,208 5,238 54,581 5,178 Current assets ,010 12,674 10,968 1,041 11,195 1,062 Cash and cash equivalents ,953 1, , Other current assets ,057 10,873 10, , Non-current assets ,266 40,863 44,240 4,197 43,386 4,116 Total liabilities ,879 38,449 38,243 3,628 36,892 3,500 Current liabilities ,371 15,447 12,646 1,200 15,552 1,475 Short-term debt ,046 6,425 2, , Other current liabilities ,325 9,022 9, , Non-current liabilities ,508 23,002 25,597 2,428 21,340 2,025 Long-term debt ,928 19,843 22,533 2,138 18,144 1,722 Other non-current liabilities ,580 3,159 3, , Minority interests Shareholders equity ,350 14,972 16,832 1,597 17,475 1,658 Amounts in accordance with US GAAP Total assets n/a 49,524 50,943 4,836 49,458 4,693 Total liabilities n/a 35,626 35,280 3,349 33,076 3,138 Shareholders equity n/a 13,776 15,535 1,475 16,220 1,539 Summary Cash Flow Data Amounts in accordance with IAS Six months ended Year ended March 31, September 30, ZAR ZAR ZAR USD ZAR ZAR USD (unaudited) (in millions) Cash flow from operating activities ,917 6,165 8, ,301 3, Cash flow from/(used in) investing activities.. (9,107) (9,964) (9,294) (882) (3,653) (2,453) (233) Cash flow from/(used in) financing activities. 5,051 3, (973) (1,178) (112) Summary Other Data Headline earnings per share (cents) Net asset value per share (cents) (at period end) 7 2, , , n/a 3, Net asset value per share excluding intangibles (cents) (at period end) , , , n/a 3, EBITDA ,056 9,977 9, ,811 5, Total debt (at period end) ,974 26,268 25,401 2,410 25,359 25,466 2,416 Capital expenditures excluding intangibles... 9,461 9,889 9, ,641 2,

15 Summary Fixed-Line Statistical Data Six months ended Year ended March 31, September 30, Fixed access lines (thousands) (at period end) ,493 4,962 4,924 4,986 4,895 Postpaid PSTN ,668 3,930 3,554 3,761 3,407 ISDN channels Prepaid Payphones Fixed-line penetration rate (%) (at period end) Revenue per fixed access line (ZAR) ,869 4,297 4,729 2,294 2,456 Total fixed-line traffic (millions of minutes) ,127 32,915 32,973 16,620 16,145 Local ,471 20,388 20,252 10,246 9,870 Long distance ,222 4,938 4,895 2,492 2,445 Fixed-to-mobile ,659 4,319 4,390 2,221 2,079 International outgoing Interconnection ,431 2,913 3,061 1,477 1,532 Number of full-time, fixed-line employees (at period end) 14 49,128 43,758 39,444 42,110 38,009 Fixed lines per fixed-line employee (at period end) Employee expenses include retrenchment expenses of R373 million, R132 million and R303 million in the years ended March 31, 2002, 2001 and 2000, respectively, and R169 million and R195 million in the six months ended September 30, 2002 and 2001, respectively. Selling, general and administrative expenses include asset write-offs of R445 million and R230 million in the years ended March 31, 2002 and 2001, respectively, and provisions for potential damages related to Telkom s arbitration with Telcordia of R375 million in the year ended March 31, As of September 30, 2002, R3,621 million of our long-term debt was guaranteed by the Government of the Republic of South Africa. Includes short-term portion of finance leases and utilized credit facilities. Includes long-term portion of finance leases. Headline earnings per share is a disclosure requirement of the JSE and is not a recognized measure under US GAAP. The following is a reconciliation between net profit and headline earnings in accordance with IAS for the periods indicated: Six months ended Year ended March 31, September 30, ZAR ZAR ZAR ZAR ZAR (unaudited) (in millions, except per share amounts) Net profit 1,527 1,622 1, Adjustments: Profit on disposal of property, plant and equipment (493) (29) (22) (6) (7) Profit on disposal of subsidiaries and joint ventures (83) (8) Property, plant and equipment impairment losses Goodwill amortization Tax and outside shareholders effects (43) (35) 1 Headline earnings ,114 1,904 1, Headline earnings per share (cents) Net asset value per share including and excluding intangibles are requirements of the JSE. Net asset value per share excluding intangibles is not a recognized measure under US GAAP. Net asset value per share including intangibles is based on net assets of R16,832 million, R14,972 million and R13,350 million as of March 31, 2002, 2001 and 2000, respectively, and R17,475 million as of September 30, Net asset value per share excluding intangibles is based on net assets of R16,302 million, R14,557 million and R12,880 million as of March 31, 2002, 2001 and 2000, respectively, and R17,033 million as of September 30,

16 8 EBITDA can be reconciled to operating profit by subtracting depreciation and amortization from EBITDA as follows: 9 Six months ended Year ended March 31, September 30, ZAR ZAR ZAR USD ZAR ZAR USD (unaudited) (in millions) EBITDA ,056 9,977 9, ,811 5, Depreciation and Amortization ,174 5,052 5, ,643 3, Operating Profit ,882 4,925 4, ,168 2, Includes short-term and long-term debt, finance lease obligations and utilized credit facilities. 10 Including Telkom internal lines of 162,460, 151,986 and 145,302 as of March 31, 2002, 2001 and 2000, respectively, and 136,459 and 157,942 as of September 30, 2002 and 2001, respectively. Each PSTN line includes one access channel, each basic ISDN line includes two access channels and each primary ISDN line includes 30 access channels. 11 Excluding ISDN channels. 12 Includes public and private payphones. 13 Local traffic includes internet traffic. 14 Excluding employees of Telkom Directory Services and Swiftnet. 11

17 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA OF VODACOM The following table sets forth summary consolidated financial and other data of Vodacom as of and for each of the three years in the period ended March 31, 2002 and as of and for each of the six month periods ended September 30, 2002 and Information in the Vodacom table reflects 100% of Vodacom s results of operations. Information with respect to Vodacom s other African operations in the Vodacom table reflects 100% of the operations of Vodacom s subsidiaries in Lesotho and Tanzania and 51% of Vodacom s joint venture in the Democratic Republic of the Congo, unless otherwise indicated. We proportionately consolidate our 50% interest in Vodacom in the Telkom Group s consolidated financial statements. Vodacom s direct network operating costs, depreciation, other operating income, employee expenses, marketing expenses, administrative expenses, amortization of intangible assets and integration costs, disposals of operations and impairment costs are presented as separate line items in Vodacom s consolidated financial statements, but have been combined under the heading operating expenses in the table set forth below. The following summary historical consolidated financial data of Vodacom as of and for each of the three years ended March 31, 2002 have been derived from Vodacom s historical consolidated financial statements beginning on page F 115 of this prospectus, which were audited by PricewaterhouseCoopers, Inc. and Deloitte & Touche, Registered Accountants and Auditors, Chartered Accountants (SA). The following summary historical consolidated financial data of Vodacom as of September 30, 2002 and for each of the six month periods ended September 30, 2002 and 2001 was derived from Vodacom s unaudited condensed consolidated financial statements beginning on page F 25 of this prospectus, which, in the opinion of Vodacom s management, have been prepared on the same basis as Vodacom s audited consolidated financial statements and reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of Vodacom s results of operations and financial position for such periods. Results for the six month periods ended September 30, 2002 and 2001 are not necessarily indicative of results that may be expected for the entire year. The consolidated financial statements of Vodacom have been prepared in accordance with IAS, which differs in certain respects from US GAAP. For a description of the principal differences between IAS and US GAAP relevant to the financial statements of Vodacom and a reconciliation to US GAAP of net income and shareholders equity, see note 45 of the notes to the audited consolidated financial statements of Vodacom as of and for the three years ended March 31, 2002 beginning on page F 176 of this prospectus and note 20 of the notes to the unaudited condensed consolidated financial statements of Vodacom as of September 30, 2002 and for each of the six month periods ended September 30, 2002 and 2001 beginning on page F 40 of this prospectus. EBITDA represents operating profit before income tax, finance charges, investment income and depreciation and amortization. We believe that EBITDA provides meaningful additional information to investors since it is widely accepted by analysts and investors as a basis for comparing a company s underlying operating profitability with that of other companies as it is not influenced by past capital expenditures or business acquisitions, a company s capital structure or the relevant tax regime. This is particularly the case in a capital-intensive industry such as communications. It is also a widely accepted indicator of a company s ability to service its long-term debt and other fixed obligations and to fund its continued growth. EBITDA is not a US GAAP or IAS measure. You should not construe EBITDA as an alternative to operating profit or cash flows from operating activities determined in accordance with US GAAP or IAS or as a measure of liquidity. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. Vodacom s customer totals are based on the total number of customers registered on Vodacom s network, which have not been disconnected, including inactive customers, as of the end of the period indicated. See Business Mobile communications South Africa Customers beginning on page 122 of this prospectus for a discussion of Vodacom s procedures with respect to disconnections and inactive customers. Vodacom s churn is calculated by dividing the average monthly number of disconnections during the period by the average monthly total reported customer base during the period. Vodacom calculates penetration, or teledensity, based on the total number of customers at the end of the period per 100 persons in the population of South Africa. Population is the estimated South African population at the mid-year in the periods indicated as published by Statistics South Africa, a South African governmental department. Vodacom s traffic comprises total traffic registered on Vodacom s network, including bundled minutes, outgoing international roaming calls and calls to free services, but excluding national and incoming international roaming calls. Vodacom s average monthly revenue per customer, or ARPU, is calculated by dividing the average monthly revenue during the period by the average monthly total reported customer base during the period. ARPU excludes revenue from equipment sales, other sales and services and revenue from national and international users roaming on Vodacom s networks. Vodacom s average monthly minutes of use per customer, or MOU, is calculated by dividing the average monthly minutes during the period by the 12